Nevada Gaming Policy Committee meeting yielded some surprises

Gov. Brian Sandoval’s convening of the Nevada Gaming Policy Committee this past Wednesday yielded some surprises that should not have been surprises and a wakeup call for some gaming operators.

Two areas that certainly caught folks by surprise were 1. The revelation that anyone participating directly or indirectly in the world of marijuana could be caught up in a civil RICO suit and 2. That any gaming operator doing business with a party involved in the marijuana business would have to report those transactions as Suspicious Activity Reports with the Fed and would in so reporting effectively be admitting they (the casino operator) were participating in money laundering.

I would offer that these two items, if the gaming operator’s legal or compliance departments were on top of their game should not have been a surprise. Both the exposures under RICO and Suspicious Activity Reports are not recently enacted standards but have been out there for years.

One of the lawyers presenting at the meeting regaled the Committee with a story of how a civil RICO suit had been filed by an inn that was being impacted by the pending opening of a marijuana dispensary. As the suit was filed before the dispensary opened, investors abandoned the opportunity and the dispensary did not open.

However, as RICO laws treat all participants, no matter how indirectly involved, as equals in a suit, the suit was ultimately settled by the accountant for the business and the insurance company that put up the state required tax bond for the business. This story correctly woke up the Committee members that as long as marijuana is deemed by the federal government the legal equivalent of cocaine any intersecting business activity with a marijuana business could be at great risk either civilly or criminally.

Not that many years ago the notion of money laundering was basically about taking small bills and either turning them into big bills and/or getting the illicit cash into the banking/financial system. The current perspective is more akin to the notion that if the holder of illicit money gets any benefit (gambling, eating, drinking, etc.) for the use of their illicit funds the money has been laundered in some form.

So whereas most casinos think they are only obligated to report money from a questionable source, the reality is some sources of money are deemed so bad by the Fed that casinos really should not be doing business with persons whose money comes from such sources.

By the way, for monetary reporting purposes the federal government treats casinos just like banks. Nevada used to have an exemption from such reporting requirements but years ago, at the request of many industry members, that exemption was surrendered. Wonder how many operators wish that exemption still existed?

As the purpose of the Committee is to form recommendations about how far the gaming industry should stay from the legal marijuana industry, it will contemplate the information gathered on the day, seek more information and likely reconvene in February.

Cantor-Asher update

There is yet another odd twist regarding the lawsuit of Asher vs. Cantor. In the process of legal disputes between well moneyed parties, a jury verdict often just stimulates one or more appeals, and those watching the battle have been waiting to see what basis Cantor would appeal the very surprising jury verdict in favor of Asher.

Here is the twist, according to people very familiar with William Hill’s interest in the case (William Hill acquired Asher’s Brandywine race and sportsbook operations and Asher continues to work for William Hill) have speculated Cantor may not have filed an appeal on the case as William Hill is supposedly in active negotiations to buy Cantor’s CG Technology (Cantor’s race and sportsbook operations), and pending how that goes Cantor may or may not pursue an appeal of the verdict from the jury trial.

Reading the numbers

Last, but not least, concerning Nevada’s October gaming revenue growth of .27%, the results are a bit challenging to interpret. There was of course the impact on certain properties because of the October 1 shooting incident, but there was also significant convention business, which while very good for room occupancy and slots often negatively impacts table game revenues as so much of the visitor’s time is tied up with convention events.

What should not be ignored in the results though was the strong growth in slot revenue in most areas other than the Las Vegas Strip. Perhaps from economic confidence, great weather allowing much lower power bills, improved wages or some combination of all of the above, the locals were certainly out playing slots in force.

Roulette seems to continue to be the growing game of preference for the millennial generation as it easily beat out craps revenue and showed a 8.51% growth while most all other table game segments showed either significant declines or nominal growth from the prior year.

November should show a return to normalcy and provide better indicative insights into Nevada gaming.